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May 25, 2018

Even as low bidder, Russia’s Rosoboronexport may still loose air defense program in India

Even though Rosoboronexport has emerged as lowest bidder in the Indian
army’s $1.5 billion very short range air defense or VSHORAD program, the
Russian company may loose the contract following serious complaints
from the other competitors in the fray.

The Indian Ministry of
Defence last week opened the commercial bids of the long pending VSHORAD
program, in which Rosoboronexport was declared lowest bidder against
Saab of Sweden and MBDA of France, a senior MoD official said.

“But
the Russian defense company is not going to get [VSHORAD] contract any
time soon and the program may face cancellation following complaints
from one of the competitor,” he noted.

The Indian Army floated a
restricted global tender for purchase of more than 5,000 VSHORAD
portable systems to Saab of Sweden, Rafael of Israel, MBDA and Thales of
France, Raytheon of United States, Rosoboronexport of Russia and LIG
Nex 1 of South Korea. Rafael, Thales and LIG Nex 1 did not qualify after
the technical evaluation and Raytheon did not participate in the bid.
Only Igla-S by Rosoboronexport, RBS 70 NG by Saab and Mistral by MBDA
were qualified for trials after completion of technical evaluation in
2012.

The Indian army conducted two rounds of separate trials
before opening the commercial bids last week. A senior service official
said the “Indian army discovered Igla-S system fielded by
Rosoboronexport to be non-compliant and not-recommended for induction
into the service because it failed missile locking and direct hit
repeatedly during both separate trials.”

However, the Russian
system was permitted and eventually approved by some officials within
the service and MoD, despite the strict defense procurement guidelines
that non-compliant systems should be rejected outright.

MoD is
not expected to award this contact anytime soon, given the current funds
crunch in India. Any award to a Russian company could also lead to U.S.
sanctions under the Countering America’s Adversaries through Sanctions
Act or CAATSA, another MoD official noted. He also pointed to plans for a
thorough review before any decision is made to move forward or cancel
this program.

Of the 5,175 missiles and associated equipment
sought in the VSHORAD program, 2,315 missiles are to be bought in fully
formed condition, 260 semi- knocked down condition and 1,000 missiles in
completely knocked down condition and 600 missiles will be produced in
India. In addition, Indian army is seeking other equipments including
launchers, sensors, thermal imaging sights and command & control
units.

An executive with the industry group, Federation of Indian
Chambers of Commerce and Industry or FICCI, who requested anonymity
alleged that the Russian company never followed the technology transfer
norms in the VSHORAD program. Since the tender involved domestic
transfer of technology, Saab teamed up with state-owned Bharat
Electronics Ltd and MBDA tied-up with private sector Larsen & Toubro
Ltd, but Rosoboronexport chose to go alone.

“Indian defense
forces including army and the air force have large requirements of short
range air defense systems,” said Mahindra Singh, a retired army major
general. “It makes sense to produce these systems in the country with
full transfer of technology from suitable overseas original equipment
manufacturers.”